, Research Paper
“Everything is worth what its purchaser will pay for it.” This phrase was said many centuries ago and is still worth today. Any time customer, in fact these customers whose costs are driven by what they purchase, increasingly look to purchasing as a way to increase profits and thus pressure suppliers to reduce prices. A good example beside the one in the article is when you are going to buy a car and you start searching about what car dealer is the best for you to buy yours. How can you decide which of the dealers it’s the best for you, it is a good question. A growing number of suppliers have created a customer value models, that is no more than data-driven representations, of the worth in monetary terms, of what the suppliers are going to could do for its customers.
I have been talking about values, but what they are and what values are in business is what I’m going to explain right now. In business market values are the worth in monetary form of the technical, economic, service and social benefits any customer receives in exchange for the price it pays for a market offering. An example of value in monetary term is dollars per unit, guilders per liter, or kroner per hour. On the other hand, benefits are no more than in which any costs a customer incurs in obtaining the desire benefits, except for purchase price, are included. And finally value is what a customer gets in exchange for the price it pays. In fact, value is one of the two elemental characteristics of marketing offer; the other one is price.
Field value assessments that is the most commonly and accurate method used to build customer value models. This value is used to collect data about customer value models. However, if the field value does not work suppliers use direct and indirect survey question and focus groups. As everything in our life, the first time you do something is the most difficult. To get started with the customer value model the first thing a supplier need to do is to put together the right kind of value research team. In this team should be included the people with the product, engineers in the specified field, and people with marketing experience. This last option is very important because it is really important to have people who know the customer way of thinking. The next step is to know the right market segment. Knowing this, the suppliers create a base with at least twelve customers to build an initial value model. Then it is a good time to generate a comprehensive list of value elements. These elements will be the one that affects the costs and benefits of the offering in the customer’s business. The elements could be technical, economic, service or social in nature and will vary in their tangibility. But suppliers have to be very carefully on checking which elements left out, especially those that might make the suppliers’ market offering look unfavorable next to the next-best-alternative offering will undermine the projects credibility. By knowing as many elements as possible the team will be able to determine more accurately the difference in functionality and performance its offers provides relative to the next-best-alternative.
Most of the time the customers do not know that they have the data information that the suppliers are looking for. Some time the only way to find this data is for the team members to ask around until they come across the person who knows where to find the information. These teams also need to be creative in finding other sources of information. Independent industry consultants or knowledgeable personnel in the supplier company can be good sources of initial estimates. The comfort with which team can establish monetary estimates for its value elements will vary. Actually, most suppliers do not even attempts to assign monetary amounts to social elements. Instead, they put those elements and discuss them with the customer in a qualitative way after presenting quantitative results. An example of this is the Qualcomm Company, that not assign monetary amounts to many less-tangible elements but still includes them in its analysis as “value placeholders.” In any field value assessments, the suppliers will find that some assumptions must be made in order to complete an analysis. It is critical to suppliers to be explicit about any assumptions it makes. If a customer does not know how or why the team assigned a certain value to an element, the supplier’s credibility will be compromised.
After building the initial value model the suppliers should validate it, by conducting additional assessments with other customers in the market segment. Doing this the supplier will also learn how the value its offering provide varies across kinds of customers. The supplier will also need to create value-based sale tools. One common sale tool is a value case history, which is no more than written accounts that document the costs savings or added value that a customer receive from its uses of a supplier market offering. Now it is a good time to put an understanding of value to use. A good way to do this is using the supplier knowledge to tailor supplementary service, programs and systems in its current market offering and to guide the development of new offerings. A company’s ability to manage flexible markets offerings successfully rest on its understanding of the value each component of an offering creates as well as its associates cost. Identifying and eliminating value drains result in better allocation of resources and improved profitability.
Gaining customer is another of the steps of this project. Knowing of how the market offers specifically deliver value to customer enables suppliers to craft persuasive propositions. By providing evidence to customers of the company’s accomplishments, suppliers demonstrate their trustworthiness and commitment to customers. In this way customers feel more self-confident with the company they are doing business with. Understanding value in business is the essence of customer value management. It is also good for delivering superior values and obtain an equitable return for it. Now are you ready to choose your car’s vendor.
Harvard Business Review, Business Marketing, November/December 1998.